Reports says extra money should be used to offset rate increases.
Excellus BlueCross BlueShield and other BlueCross BlueShield health insurance companies may be setting aside too much money in surplus funds, according to a report released today by Consumers Union. This is the company's DeWitt office.Syracuse, N.Y. -- At the same time it has been steadily raising customer rates, Excellus BlueCross BlueShield may be setting aside more money than necessary to protect against potential financial losses, according to a report released today by Consumers Union.
The report said state insurance commissioners looking to curb rate increases should scrutinize the amount of surplus money amassed by nonprofit BlueCross BlueShield plans like Excellus.
Surplus is the excess of an insurance company’s assets over liabilities, which insurers set aside to protect the company and its members from financial losses. Excellus had $965.1 million in surplus at the end of 2009. Its surplus fund grew as high as $1.18 billion in 2007.
The report by Consumers Union, publisher of Consumer Reports magazine, looked at 10 BlueCross BlueShield plans nationwide and found seven of them held more than three times the amount of minimum surplus recommended by the National Association of Insurance Commissioners.
“Consumers are struggling to afford health insurance and BlueCross BlueShield plans have been amassing a lot of surplus over the last 10 years as rates have gone up,” said Lauren Sobel, senior attorney with Consumers Union. “The two should be considered together.”
The report showed BlueCross BlueShield of Arizona had over seven times more surplus than required in 2009, the highest level of the 10 plans reviewed. An Alabama Blues plan had the lowest level — 2.5 times the minimum. Excellus had the second lowest level of surplus — 2.7 times more than the minimum, according to the report.
Excellus said New York requires insurers to keep higher levels of surplus than NAIC. Excellus said it has 1.6 times more than the state minimum. “It is in consumers’ interests to have health plans exceed minimum standards for financial security,” Excellus said in a prepared statement. “Taxpayers have paid billions of dollars to bail out other industries that, for various reasons, became financially vulnerable. That mistake should not be repeated in the health insurance industry.”
The report did not say what is the appropriate level of surplus. Sobel said that’s up to state insurance regulators to figure out.
The report shows for every $1 Excellus lost after paying claims and expenses, it held $66 in surplus funds — more than the other Blues plans studied. That suggests Excellus has had few losses, Sobel said. “If that’s been the trend, it calls into question how much surplus is appropriate if you don’t need the surplus to account for huge losses,” she said.
Excellus raised premium rates an average of 8 percent in 2009. Its surplus grew that same year by $107.2 million, according to the report.
In addition to using surplus funds as a cushion against losses, some Blues plans also use the money to pay for technology upgrades, new product development and expansion, according to the report.
Consumers Union said companies found to be holding too much surplus should use the extra money to offset rate increases, give policyholders refunds or spend the money on charitable purposes.